The ACIT, Circle-9, Surat V. M/s. Balar Exports, Surat

ITA 3942/AHD/2007

• Counselvise Citation: 394220514 RSA 2007
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 25-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

ITA NO.3942/AHD/2007. A.Y. 2004-05. 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD ( BEFORE SHRI D.K. TYAGI & SHRI A. MOHAN ALANKAMONY) I.T .A.NO.3942/AHD/2007 (ASSESSMENT YEAR : 2004-2005) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-9, ROOM NO.423, AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) VS. M/S. BALAR EXPORTS BALAR BUILDING, OPP. PANCHRATNA TOWER, LAMBE HANUMAN ROAD,SURAT (RESPONDENT) PAN: AACFB 4703 H APPELLANT BY : SHRI SAMIR TEKRIWAL, SR. D.R . RESPONDENT BY : SHRI J. P. SHAH. ( )/ ORDER DATE OF HEARING : 2-11-2011 DATE OF PRONOUNCEMENT : 25-11-2011 PER: SHRI A. MOHAN ALANKAMONY,A.M. THIS APPEAL IS FILED BY THE REVENUE, DIRECTED AGAI NST THE ORDER OF LD. CIT (A)S ORDER NO.CAS-V/454/06-07 DATED 25-07-2007 FOR THE A SSESSMENT YEAR 2004-05 PASSED UNDER SECTION 250 READ WITH SECTION 143(3) OF THE A CT. 2. THE REVENUE HAS RAISED FOUR GROUNDS IN ITS APPEA L, WHEREIN GROUND NO.4 IS GENERAL IN NATURE AND DO NOT SURVIVE FOR ADJUDICATI ON. THE OTHER THREE GROUNDS ARE REPRODUCED HEREIN BELOW FOR ADJUDICATION:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE F ACTS AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.33,22,860/ - MADE BY A.O. IN RESPECT OF UNDER VALUATION OF CLOSING STOCK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT (A) HAS ERRED IN DELETING THE TELESCOPIC ADDITI ON IN RESPECT OF LOW GROSS PROFIT OF RS.9,47,308/- MADE BY AO AFTER REJECTING THE BOOK RESULT OF THE ASSESSEE FOR FALL IN GROSS PROFIT,AS PE R ORDER U/S.143(3) OF THE ACT DATED 28-12-2006. ITA NO.3942/AHD/2007. A.Y. 2004-05. 2 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE FACTS AND IN LAW, THE LD. CIT (A) HAS ERRED IN RESTRICTING THE DISALLO WANCE OUT OF FOREIGN TOUR EXPENSES TO RS.25,000/- AS AGAINST RS.1,00,000 /- AS MADE BY THE A.O. 3. THE ASSESSEE IS A RESIDENT FIRM FILED ITS RETURN OF INCOME ON 28-10-2004 ADMITTING THE TOTAL INCOME OF RS. 2,10,31,216/- WHICH WAS DUL Y PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 28-12-2006 WHEREIN THE DISALLO WANCE WAS MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK, FOREIGN TRAVEL EX PENSE ETC. GROUND NO.1.:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE FACTS AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.33,22,860/ - MADE BY A.O. IN RESPECT OF UNDER VALUATION OF CLOSING STOCK. 4 THE ASSESSEE IMPORTS ROUGH DIAMONDS FROM FOREIGN COUNTRIES ESPECIALLY BELGIUM WHICH ARE PROCESSED BY THE ASSESSEE BY EMPLOYING SK ILLED PERSONS TO MAKE IT MARKETABLE. IN THE PROCESS THERE ARE REJECTIONS OF SOME PORTION OF THE DIAMONDS. THE RAW BLOCKS PREPARED BY THE APPELLANT ARE ALSO OF DI FFERENT VARIETIES. THE PROCESS IS ALSO COMPLEX IN NATURE. BASED ON THIS COMPLEX NATURE OF INDUSTRY THE A.O. WAS OF THE OPINION THAT THERE IS NO METHOD AVAILABLE WITH THE DEPARTME NT TO KNOW WHETHER THE REJECTION REPORTED BY THE ASSESSEE IS CORRECT. FURTHER, HE OP INED THAT THE DEPARTMENT IS LEFT AT THE MERCY OF THE ASSESSEE SINCE THEY MAY COME OUT WITH CLOSING STOCK FIGURES TO SUIT THEIR REQUIREMENTS BY MANIPULATING ACCOUNTS AND STOCK REG ISTERS. THE AO ALSO NOTICED THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF INVEN TORY IN TERMS OF QUALITY. IN VIEW OF THESE FACTS THE LD. AO REJECTED THE BOOKS OF ACCOUN TS AND RE-COMPUTED THE SUPPRESSED CLOSING STOCK AT RS.33,22,860/- AS FOLLOWS :- 4.1 I, THEREFORE, IN VIEW OF THE DEFECTS IN THE SYSTEM OF METHOD OF ACCOUNTING, REJECT THE BOOK RESULTS OF THE ASSESSEE UNDER SECTION 145( 3) OF THE ACT AND PROCEED TO ESTIMATE THE VALUE OF CLOSING STOCK AS UNDER :- ITA NO.3942/AHD/2007. A.Y. 2004-05. 3 COST OF PRODUCTION ROUGH DIAMOND. WEIGHT IN CARAT VALUE RS. OPENING STOCK OF ROUGH DIAMOND 28265.52 8,66,56 ,432 PURCHASE OF ROUGH DIAMOND. 195596.42 37,38,45,957 (-)IMPORT EXCHANGE RATE DIFFERENCE. 95,47,114 LESS: REJECTION OF ROUGH DIAMOND 4,31,764 LESS: CLOSING STOCK OF ROUGH DIAMOND. 97050.77 18,39,20,331 CONSUMPTION OF ROUGH DIAMOND 126811.94 26,66,03,180 ADD: MANUFACTURING EXP. 3,25,49,000 CLEAVING RS. 3,21,12,797 ELECTRICITY RS. 4,36,203 THEREFORE, COST OF PRODUCTION 40451.58 29,91,52,180 VALUATION OF CLOSING STOCK OF POLISHED DI AMOND OPENING STOCK OF POLISHED DIAMOND 12916.01 RS. 9,88,83,587 PRODUCTION OF POLISHED DIAMOND 40451.58 RS. 2 9,91,52,180 (A) 53367.59 RS. 39,80,35,767 SALES 41073.65 RS. 39,54,46,336 LESS: EXCHANGE DIFFERENCE ON EXPORT RS. 53,88,282 RS. 39,00,58,054 LESS: GP ( @ 13.51) RS. 5,26,96,843 THEREFORE, COST OF SALE (B) RS. 33,73,61,210 THEREFORE, CLOSING STOCK (A-B) 12294.00 RS. 6,06,74,557 CLOSING STOCK AS PER BOOK 12294.00 RS. 5,73,51,697 THEREFORE, SUPPRESSION OF CLOSING STOCK RS. 33,22,860 5. BEFORE THE LD. CIT (A), THE APPELLANT HAD SUBMIT TED THAT THE COMPANY HAD BEEN MAINTAINING PROPER BOOKS OF ACCOUNTS INCLUDING STOC K BOOK. THE APPELLANT FURTHER CONTENDED THAT THE CLOSING STOCK WAS DETERMINED FRO M SUBSEQUENT YEARS SALES AND THIS ITA NO.3942/AHD/2007. A.Y. 2004-05. 4 METHOD WAS FOLLOWED CONSISTENTLY. SINCE SUCH METHOD WAS FOLLOWED, THERE WAS AN ACCURACY FOR VALUING THE CLOSING STOCK AND THERE CA NNOT BE ANY DEVIATION. CONSIDERING THE ELABORATE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT (A) CAME TO THE FOLLOWING CONCLUSION:- I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE AO FROM THE FACTS OF THE CASE AS HAS BEEN SEEN IT I S FOUND THAT APPELLANT COMPANY HAS BEEN MAINTAINING THE STOCK RECORDS IN Q UANTITATIVE TERMS ON DAILY BASIS IN RESPECT OF ROUGH DIAMONDS, POLISHED DIAMON DS AND REJECTED LOTS. AS FAR AS QUANTITY OF SUCH ITEMS IS CONCERNED THERE IS NO DISPUTE BETWEEN THE APPELLANT COMPANY AND THE AO. THE ONLY DISPUTE BETWEEN THE AO AND THE APPELLANT IS THAT ON ACCOUNT OF VALUATION OF SUCH STOCK. ACCORDING TO THE APPELLANT COMPANY, IT HAD VALUED ITS CLOSING STOCK ON THE BASIS OF COST OR MA RKET VALUE WHICHEVER IS LESSER AND THAT THE SAME METHOD IS FOLLOWED CONSISTENTLY. AS REGARD THE MARKET VALUE OF CLOSING STOCK IS CONCERNED THE APPELLANT HAS RELIED ON THE SALES MADDER SUBSEQUENTLY AFTER THE YEAR END WHICH ACCORDING TO IT WAS ALL EXPORT SALES AND THAT SUCH EXPORT RECEIPTS WERE ALSO RECEIVED IN FOR EIGN CURRENCY WHICH COULD BE VERIFIED. FURTHER ACCORDING TO THE APPELLANT SINCE THERE WAS NO PRODUCTION MADE DURING THE FIRST QUARTER OF SUBSEQUENT YEAR THERE W AS NO DOUBT ABOUT THE VALUE OF SUCH STOCK AT LOWER OF COST ADOPTED BY THE APPELLAN T COMPANY. WHERE AS ACCORDING TO THE AO SINCE THE APPELLANT HAD NOT MAI NTAINED ITS STOCK RECORDS IN QUALITATIVE TERMS IT WOULD BE INAPT TO ACCEPT THE M ETHOD OF ACCOUNT ADOPTED BY THE APPELLANT. FURTHER ACCORDING TO THE AO SINCE TH E DIAMONDS VERY IN SIZES AND QUALITY IF THE QUALITY OF DIAMOND IS NOT CONSIDERED IT WOULD GIVE DISTORTED PICTURE OF THE CLOSING STOCK AND THEREFORE, RIGHT METHOD OF VA LUATION OF STOCK SHOULD BE AVERAGE VALUE METHOD AND IF THAT BE ADOPTED THE VAL UE OF CLOSING STOCK WOULD WORK OUT TO RS .6,06,74,557/- AS AGAINST RS.5,73,51 ,697/-. ON THE BASIS OF CURSORY LOOK PRIMA-FACIE APPELLANTS PLEA APPEARS T O BE CORRECT THAT COST OR MARKET VALUE IS AN ACCEPTED METHOD OF ACCOUNTING AN D THAT THE SAME IF FOLLOWED CONSISTENTLY SHOULD NOT BE ALTERED WITH. HOWEVER, O N LOOKING TO THE VARIOUS OTHER FACTORS NOT CONSIDERED BY THE APPELLANT IT WOULD BE SEEN THAT MARKET VALUE PURPORTED TO BE LESSER THAN THE COST DOES NOT STAND ON SOUND FOOTINGS. FROM THE FACTS AS STATED BY THE APPELLANT IT IS SEEN THAT TH E MARKET VALUE OF CLOSING STOCK OF CERTAIN ITEMS IS TAKEN ON ABSOLUTE VALUE OF EXPORT SALES, I.E. THE APPELLANT HAD ADOPTED THE SALE PRICE OF EXPORT SALES AT WHICH IT HAD EXPORTED GOODS. HOWEVER, WHILE DOING SO THE APPELLANT HAS IGNORED THE VITAL FACT THAT SUCH EXPORT SALE WOULD BE ELIGIBLE FOR INCENTIVE IN TERMS OF DUTY DRAWBACK AND OTHER INCENTIVES IN TERMS OF DEPB LICENSES ETC., IF THAT BE CONSIDERED AS PAR T OF SALE PROCEEDS WHICH OF COURSE PLAY A VITAL ROLE IN DETERMINING THE SALE PR ICE, THE MARKET VALUE TAKEN BY THE APPELLANT COMPANY IS NOT CORRECT AND NEEDS UPWA RD REVISION. HOWEVER, FROM THE RECORDS AVAILABLE BEFORE ME, IT IS NOT POSSIBLE TO DETERMINE WHETHER THE APPELLANT HAS IN FACT, RECEIVED THE EXPORT INCENTIV ES IN TERMS OF DEPB LICENSES, DUTY DRAWBACK, ETC. IF SUCH INCENTIVES ARE RECEIVED BY THE APPELLANT THEN THE SALE PRICE SHOWN BY THE APPELLANT IN SUPPORT OF THE LOWE R MARKET PRICE OF PART OF THE ITA NO.3942/AHD/2007. A.Y. 2004-05. 5 CLOSING STOCK CANNOT BE ACCEPTED AS CORRECT. HOWEVE R, IF THE APPELLANT HAS NOT RECEIVED EXPORT INCENTIVES, THEN THE SALE PRICE SHO WN BY THE APPELLANT IN SUPPORT OF THE LESSER MARKET VALUE WILL HAVE TO BE ACCEPTED AS CORRECT MARKET VALUE. THE AOS OBJECTION IN REGARD TO NON-AVAILABILITY OF QUALITATIVE DETAILS OF CLOSING STOCK OF FINISHED GOODS APPEARS TO BE IMPRO PER, BECAUSE THE AR OF THE APPELLANT HAS POINTED OUT THAT THE TOTAL QUALITATIV E DETAILS OF THE CLOSING STOCK OF FINISHED GOODS WERE SUPPLIED TO THE A.O. AND THAT T HE SAME HAVE ALSO BEEN FILED BEFORE ME. THE AR OF THE APPELLANT HAS ALSO POINTED OUT THAT IT IS ONLY ON THE BASIS OF COMPARISON OF QUALITY OF THE CLOSING STOCK OF FINISHED DIAMONDS WITH THE RELEVANT SALES BILLS FOR THE SUBSEQUENT YEAR IT WAS CONTENDED THAT IN RELATION TO SOME QUALITIES OF THE CLOSING STOCK OF FINISHED DIA MONDS, THE MARKET PRICES ARE LESS THAN THE COST PRICE; WHEREAS FOR SOME QUALITIE S OF CLOSING STOCK OF FINISHED DIAMONDS, THE MARKET PRICES ARE MORE THAN THE COST PRICE. I, THEREFORE .DIRECT THE A.O. TO VERIFY FROM THE RE CORDS WHETHER THE APPELLANT HAS RECEIVED THE EXPORT INCENTIVES DURING THE YEAR. IF THE APPELLANT HAS RECEIVED THE EXPORT INCENTIVES DURING THE YEAR, THEN AS STAT ED ABOVE, THE SALES PRICE QUOTED IN SUPPORT OF LESSER MARKET PRICE THAN COST WOULD NOT BE CORRECT. IN SUCH EVENT THE AOS ACTION OF BRUSHING ASIDE THE VALUATI ON MADE BY THE APPELLANT WOULD BE JUSTIFIED. HOWEVER, IF THE APPELLANT HAS N OT RECEIVED ANY EXPORT INCENTIVES DURING THE CURRENT YEAR, THE SALES PRICE QUOTED BY THE APPELLANT IN SUPPORT OF LESSER MARKET PRICES THAN THE COST FOR V ALUATION OF CLOSING STOCK WOULD BE PROPER. IN SUCH EVENT, THEREFORE, THE AOS ACTIO N OF BRUSHING ASIDE THE CONSISTENTLY FOLLOWED METHOD OF THE APPELLANT WOULD NOT BE JUSTIFIED. IF, THEREFORE, THE APPELLANT HAS NOT RECEIVED ANY EXPORT INCENTIVE S DURING THE YEAR, I DIRECT THE AO TO ACCEPT AS CORRECT THE METHOD OF VALUATION OF CLOSING STOCK OF FINISHED DIAMONDS ADOPTED BY THE APPELLANT AND TO DELETE THE RELEVANT ADDITION MADE BY HIM ON THE GROUND OF IMPROPER VALUATION OF CLOSING STOCK OF FINISHED GOODS. THIS GROUND OF APPEAL IS, THEREFORE, DECIDED ON THE ABOVE LINES WITH THE DIRECTION TO THE AO TO VERIFY THE ABOVE FACTS FROM RECORDS AND TO CONCLUDE THE ISSUE ACCORDINGLY. 6. THE LD. AR SUBMITTED BEFORE US THAT THE LD. CIT (A) HAS RIGHTLY COME TO THE CONCLUSION THAT FOR VALUATION OF CLOSING STOCK THE METHOD COST PRICE OR MARKET VALUE, WHICHEVER IS LESS IS ADOPTED AND FOLLOWED CONSIST ENTLY THEN SUCH METHOD NEED NOT BE ALTERED. THE LD.AR FURTHER ARGUED THAT FOR THE RELE VANT ASSESSMENT YEAR THE ASSESSEE HAD ENSURED THAT THE CLOSING STOCK WAS CROSS-VERIFI ED WITH THE ACTUAL SALE DURING THE SUBSEQUENT YEAR AND THEREFORE THE VALUE ADOPTED BY THE ASSESSEE IS IN ORDER. THE LD.AR FURTHER SUBMITTED THAT SINCE THE ASSESSEE HAD MAINTAINED PROPER RECORDS WITH ITA NO.3942/AHD/2007. A.Y. 2004-05. 6 RESPECT TO STOCK AND SUBSEQUENTLY VERIFIED WITH SAL E, THE VALUE OF CLOSING STOCK ADOPTED BY THE APPELLANT IS ACCURATE AND THEREFORE THE ORDE R OF THE TRIBUNAL IN ITA NO.3010/AHD/2010 DT 11-2-2011 IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 IS NOT RELEVANT SINCE FACTS OF THE RELEVANT ASSESSMENT YEAR IS NOT IDENTICAL. 7. THE LD. DR ON THE OTHER HAND RELIED ON THE DECIS ION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 OF THE TRIBUNAL AHMEDAB AD BENCH-B IN ITA NO.3010/AHD/2010 DATED 11-2-2011 WHEREIN THE TRIBU NAL HELD THE ISSUE AGAINST THE ASSESSEE BY UPHOLDING THE LD. CIT(A)S ORDER. THE LD. D.R. FURTHER ARGUED THAT THE ASSESSEE HAD NOT FURNISHED SUFFICIENT DETAILS OR MA INTAINED STOCK RECORDS IN A MANNER IN WHICH THE VALUATION OF CLOSING STOCK COULD BE CORRE CTLY ARRIVED AT. HE THEREFORE, PRAYED THAT THE ORDER OF THE LD. AO MAY BE UPHELD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD ALONG WITH THE PAPER BOOK SUBMITTED BY EITHER PARTY. THE FACTS OF THE CASE BEFORE US ARE NOT IDENTICAL TO THE FACTS INVOLVED FOR THE ASSESSMENT YEAR 2007-08 IN THE ASSESSEES OWN CASE. IN THE YEAR BEFORE US, THERE IS A FINDING OF THE LD. CIT(A) THAT THE ASSESSEE HAS CO-RELATED ITS CLOSING STOCK WITH THE SALES SUBSEQU ENTLY AND COUNTER VERIFIED THE VALUE OF ITS STOCK. LD. CIT (A) HAS VERIFIED THE SAME AND STATED SO IN HIS ORDER. FURTHER AFTER ANALYSING THE ISSUE LD. CIT (A) HAS COME TO A CONCL USION THAT THE METHOD OF ACCOUNTING FOR VALUING THE CLOSING STOCK NEED NOT BE ALTERED S INCE THE ASSESSEE HAD CONSISTENTLY FOLLOWED THE SAME METHOD FOR VALUING THE CLOSING ST OCK, THUS REJECTED THE CONCEPT OF WEIGHTED AVERAGE METHOD PROPOSED BY THE LD.AO. THE LD.CIT(A) HAVE ALSO MADE A CLEAR FINDING THAT THE ASSESSEE WAS MAINTAINING PRO PER RECORDS OF ITS STOCK AND THE BOOKS OF ACCOUNTS TO BE RELIABLE. IN THIS CIRCUMSTA NCE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). IT IS O RDERED ACCORDINGLY. GROUND NO.2 :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE TELESCOPIC ADDITION I N RESPECT OF LOW GROSS PROFIT OF ITA NO.3942/AHD/2007. A.Y. 2004-05. 7 RS.9,47,308./- MADE BY THE AO AFTER REJECTING THE B OOK RESULT OF THE ASSESSEE FOR FALL IN GROSS PROFIT, AS PER ORDER U/S. 143(3) OF T HE ACT DATED 28-12-2006/ 9. THE LD. AO NOTICED THAT THE GROSS PROFIT RATIO O F THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR HAS COME DOWN TO 13.51% FROM 15.20% WHICH IS QUITE ABNORMAL AND SINCE THE BOOKS OF ACCOUNTS WERE REJECTED, THE LD. AO RE-ADJUSTED THE G.P. RATIO AT 13.76% AND ESTIMATED THE GROSS PROFIT AT RS.5,57,27 ,098/- AGAINST THE GROSS PROFIT OF RS.5,47,29,790/- THUS ADDITION OF RS.9,47,308/- WAS MADE. 10. WHEN THE MATTER WAS TAKEN UP BEFORE THE LD. CIT (A), THE LD. CIT (A) AFTER DELIBERATING THE ISSUE CAME TO A CONCLUSION THAT TH E APPELLANT HAS MAINTAINED PROPER BOOKS OF ACCOUNTS AND CORRECTLY RECORDED ITS PURCHA SE AND SALES INVOICES. THE LD. CIT(A) ALSO OBSERVED THAT THERE WAS NO ADVERSE REP ORT BY THE AUDITORS IN THEIR STATUTORY AUDIT REPORT. THE LD. CIT (A) FURTHER OBSERVED THAT THE AO HAS NOT FOUND ANY DEFECT IN THE ACCOUNTS AND IN THE QUANTITATIVE RECORDS MAINTA INED BY THE APPELLANT. CONSIDERING ALL THESE FACTS, THE LD. CIT (A) CAME TO A CONCLUSI ON THAT NET PROFIT OF 7.55% APPEARS TO BE REASONABLE AND HELD THAT THERE IS NO JUSTIFICATI ON IN THE APPELLANTS CASE TO DISTURB THE BOOK RESULT AND ACCORDINGLY DELETED THE ADDITION OF RS.9,47,308/-. 11. LD AR RELIED ON THE ORDER OF THE LD. CIT(A) AND PRAYED THAT THE SAME MAY BE CONFIRMED ON THE OTHER LD. DR SUPPORTED THE ORDER O F THE LD.AO 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD AND THE PAPER BOOK SUBMITTED BY EITHER PARTY. IT IS APPAREN T FROM THE FACTS OF THE CASE THE LD.CIT(A) AFTER PROPER EXAMINATION HAVE COME TO A F INDING THAT THE BOOKS OF ACCOUNTS MAINTAINED ARE IN ORDER AND COULD BE RELIED UPON. H E HAS REJECTED THE FINDINGS OF THE LO.AO. REVENUE HAS NOT COME UP WITH ANY MATERIALS T O SUBSTANTIATE ITS CLAIM CONTRARY TO THE FINDINGS OF THE LD. CIT (A). THEREFORE WE AR E LEFT WITH NO OTHER OPTION OTHER THAN TO CONFIRM THE ORDER OF THE FIRST APPELLATE AUTHORITY. IT IS ORDERED ACCORDINGLY. ITA NO.3942/AHD/2007. A.Y. 2004-05. 8 GROUND NO 3 :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE FACT S AND IN LAW, THE LD. CIT (A) HAS ERRED IN RESTRICTING THE DISALLOWANCE OUT O F FOREIGN TOUR EXPENSES TO RS.25,000/- AS AGAINST RS.1,00,000/- AS MADE BY THE A.O. 13. THE LD. AO ALSO OBSERVED FROM THE BOOKS OF ACCO UNT THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.10,00,042/- TOWARDS F OREIGN TRAVEL EXPENDITURE. SINCE THE FULL DETAILS OF THE EXPENDITURE OTHER THAN THE TICK ET EXPENSES WERE NOT BROUGHT BEFORE THE AO, THE LD. AO DISALLOWED 10% OF SUCH EXPENDITURE AMOUNTING TO RS.1,00,000/-. 14. BEFORE THE LD. CIT (A), THE ASSESSEE SUBMITTED THE DETAILS FOR THE EXPENSES INCURRED ON FOREIGN TOUR. THE ASSESSEE HAD FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE EXPORTS TO HONG KONG WAS TO THE T UNE OF RS.15 CRORES AND BEIJING WAS TO THE TUNE OF RS.32 CRORES AND THEREFORE, THE QUANTUM OF EXPENDITURE INCURRED ON FOREIGN TRAVEL WITH RESPECT TO THE TURNOVER, WAS R EASONABLE. AFTER PERUSING THE RECORDS, THE LD. CIT (A) RESTRICTED THE DISALLOWANCE TO RS.2 5,000/- AGAINST THE ADDITION OF RS.1 LACKS CONSIDERING THE QUANTUM OF IMPORT AND EXPORT MADE BY THE ASSESSEE. 15. THE LD. DR RELIED ON THE ORDER OF THE AO WHILE THE A.R. PRAYED THAT THE ORDER OF THE LD. CIT (A) MAY BE SUSTAINED. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE ASSESSEE HAD PRODUCED THE ENTIRE MAJOR TRAVEL BILL BUT COULD NOT PRODUCE BILLS FOR LOCAL CONVEYANCE AND LODGING / BOARDING EXPENSE. HOWEVER THESE EXPENSES ARE BOUND TO BE INCURRED BY THE ASSESSEE. CONSIDERING THE EXPORT AN D IMPORT TURNOVER OF THE ASSESSEE WE HAVE NO HESITATION TO FOLLOW THE ORDER OF THE LD . CIT (A). IT IS ORDERED ACCORDINGLY. 18. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ITA NO.3942/AHD/2007. A.Y. 2004-05. 9 ORDER PRONOUNCED IN OPEN COURT ON 25 11 - 2011. SD/- SD/- (D.K. TYAGI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-V, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 3- 11 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 4 /11 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 24 - 11 -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 - 11 -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25 - 11 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 5 - 11 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..